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20Q: Fee-for-Service in an Audiology Practice

20Q: Fee-for-Service in an Audiology Practice
John A. Coverstone, AuD
March 5, 2012
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From the desk of Gus Mueller

It was the summer of 1991. I had just moved to Fort Collins, CO. to open a private practice, and before too long, I would be selling hearing aids for the first time in my career—although I had been "fitting" them for 20 years in military hospitals. Other than getting the practice going, I only had two things on my to-do list. Sign up for season tickets for the Colorado Rockies (the spring of 1993 would be their inaugural season), and buy a Jeep Wrangler (I was in Colorado after all).

While purchasing my Jeep, I ran into a used car salesman who had a hearing loss. I invited him to stop in at "the new cool practice in town," and he did two weeks later. I recall thinking that it was a little ironic that one of my first hearing aid sales might be to a used car salesman. At that time, I basically only sold two models: a single-channel programmable with one memory (selling price $1600.00/pair; my cost $800.00), and a three-channel programmable with two memories (selling price $2800/pair; my cost $1300.00).

About mid-way through my long-winded presentation describing why the three-channel product was really the best for him, he interrupted me and asked a very reasonable question: "Are you just trying to sell me the higher priced model because you make more profit from it?" I could have lied and said the profit margin was the same for all products, but in fact it was $700.00 more for a pair of the three-channel instruments—and he was the kind of guy who would have asked to see the invoices. I could have told him that it required considerably more skill to fit the three-channel products, and tossed in the fact I had a Ph.D., but the skill factor would have been a lie, too. Programming compression for two extra channels just doesn't require that much extra brain power. I could have told him that it would take extra time to fit the three-channel instruments. Oh sure—an extra 10 minutes to program and verify the second memory? That seemed pretty lame too. I realized I didn't really have a good reason why my profit was $700.00 higher for the more expensive products. All of a sudden, I was feeling like, well . . . like a used car dealer!

There are many different approaches for determining a fair price for a pair of hearing aids. Like me in the 1990s, most audiologists today use a "bundling" procedure. There are some, however, who believe that "unbundling" is a better approach. One of them is our 20Q guest this month.

John A. Coverstone, AuD, is the President and CEO of Sentient Healthcare, an audiology consulting company, and clinical audiologist at Innsbruck Hearing & Balance Center, a Sentient Healthcare clinic in New Brighton, MN. Dr. Coverstone serves on the Board of Governors for the American Board of Audiology and on the Board of Directors of the Minnesota Academy of Audiology, for which he is currently President. He was the 2008 recipient of the Audiology Foundation of America Professional Leadership award.

Once the host of his own radio talk show, it's not too surprising that John has blended this skill into his audiology career. He is the co-host of AudiologyTalk, a monthly podcast for audiologists that just celebrated its second birthday, available at www.audiologytalk.com. While John and his colleague, audiologist Dean Flyger, do an excellent job of reminding us that "work can be fun," the podcast also has a serious side—check out his recent interview with AAA President Therese Walden.

As you'll quickly see from this article, Dr. Coverstone has some strong beliefs regarding why unbundling for hearing aid sales is a good thing. Many of you may disagree with this. But whether you agree or disagree, it's always good to sit back and ask why we do things the way we do, and consider if we want to be doing things the same way in the future.

Gus Mueller, Ph.D.
Contributing Editor
March 2012

To browse the complete collection of 20Q with Gus Mueller articles, please visit www.audiologyonline.com/20Q

 

 

20Q: Fee-for-Service in an Audiology Practice

 

 

 

 

1. Let's start with the basics. You say "fee-for-service." Is that related to what I've been hearing about "unbundling" related to the sale of hearing aids?

It certainly is. Unbundling refers to the way that items are billed to the patient. In an unbundled model, the price of the hearing instruments are billed separately from services provided. This differs from conventional delivery models where everything is bundled into a single price for the patient. An unbundled model offers more choices for the patient and the provider because services may be tailored to the patient's needs and what is appropriate for delivery of a hearing device.

By separating out the services that you provide, you and your patients have the ability to choose services, accessories, and other items that best suit the needs of the patient and best accompany the device(s) you both have chosen. For instance, does an older patient who is new to hearing instruments have different needs than a younger, long-time wearer? Of course! Wouldn't it make sense to offer different service options and accessories to each, even if they purchase the same devices?

2. So, you are really just talking about separating fees for devices from those of clinical services, correct?

On the most basic level, yes. However, this can also be a new way of thinking about how you provide hearing instrument-related services to your patients. Most people have never sat down and analyzed each and every service that they provide to patients. To fully implement an unbundled model, you should do an analysis of your business and assign a cost to each service provided. Along the way, you will learn a lot about your business and gain tremendous insight into the details of your clinical activities and where your money is coming from (and going!). This entails an unbundling of services from themselves also. If you simply took your current cost of a hearing aid, subtracted that from what you charge your patients, and then charged the rest as fee for service, you would be unbundling, but this is not the appropriate way to go about it.

In case you're wondering, I did just mention separating the cost of a hearing aid. Whether or not to include any markup is completely your decision, but offering hearing aids for cost or close to cost is the strictest definition of unbundling. Keep in mind, though, that the "cost" of a hearing aid is not what you are invoiced. You should consider any necessary accessories - particularly with the popularity of open fit devices that have extra parts - and your time spent checking the device and preparing the device to be fit.

3. I am interested in how this can be done, but I'm a little apprehensive about making such a big change in my business.

It is certainly understandable that any significant change may cause apprehension. However, it is important to recognize that the goal here is to identify the services that you are already providing and determine what the cost - and ultimately the fee - for those services truly is. If you are not comfortable with numbers and accounting systems, this can be done with the help of your accountant or a consultant who specializes in such things. There are a few in our industry. The goal is NOT to change the way you provide clinical services.

There will also be some changes in how you interact with your patients. This does not need to be a major change, but your patients will now see a more true representation of what hearing aids cost and will see what your time is worth. This can have many positive effects, such as better justification and understanding of why the cost of hearing aids is so high. One of the best parts of unbundling is that there are many ways to do it. You can choose a method that meets your needs and goals, as well as those of your patients.

4. Do all the clinical services need to be charged separately in an unbundled model? I would think we could give our patients too many choices and confuse them.

Honestly, you are right! If services were completely unbundled, it probably would confuse patients - not to mention providers. There can be such a thing as too many choices. Instead, most people who are unbundling services today use a "partially unbundled" model. In this model, certain fees may be grouped so as to offer groups of services and any other items, such as accessories. This still gives the patient choices, but makes them manageable choices. This also streamlines your work and avoids a potential nightmare of tracking everything in specific detail each time you provide a service.

For example: in my clinic, the hearing aids themselves are invoiced separately. Included in that price, however, are accessories such as remotes, battery chargers, or anything else that we want to routinely bundle in with the devices. The next fee is the dispensing package. Grouped in this package are the visits and procedures that each patient needs. These are essentially the services needed during the trial period and are mandatory. They cannot be negotiated as every patient needs this. Last are our long-term care packages. These mainly include variations for more time, more batteries, better accessories, VIP treatment (if applicable), and a guaranty on the warranty. For instance, if someone purchases a device with a 1-year warranty, but a care package that includes 2 years, we upgrade them by purchasing the extra year. There are many choices for how to arrange a partially unbundled system in your office. I have no doubt you can find one that works for you.

5. You mentioned offering services that are specific to the patient's needs. Describe that in more detail for me.

Let me give a couple examples. Many clinics use a factoring method to establish bundled hearing instrument prices. They might purchase entry-level instrument 'A' for $500 and high-end instrument 'B' for $1000, then use a factor of 3 to arrive at final prices to the patient of $1500 and $3000, respectively. I am making these numbers up, of course, because we don't want to run afoul of anti-trust regulations.

You probably would throw in some extras for the high-end instrument to account for some of the higher cost, but your time is what is really valuable. Are you doing THAT much less for the patient choosing a low-end instrument vs. a high-end instrument? Sometimes, yes. Higher end devices tend to have more features and options that need explaining, adjusting, etc. Are you spending $1500 less of your time, though? Probably not. In this model, you may have shorted yourself because you are not collecting a fee commensurate with your time spent with the patient. Remember, we ultimately have only our time and expertise to offer our patients.

Another example is a new hearing instrument user vs. a long-time user. Who will need more of your time for fitting, counseling and follow-up? In most cases, it will be the new user - often by a lot. Is it fair to charge both users the same amount when one individual will almost always be using more of your time? That is a question that you must answer for yourself, but it is one of the big reasons that originally drove me to look at unbundling when I opened my first clinic.

6. So does the patient still pay for everything up front?

Fortunately for you, this is a completely separate issue from unbundling. As I mentioned a moment ago, you have a lot of flexibility in how you charge for your services and products. Some providers may actually be attracted to the more consistent influx of revenues, whereas many would prefer the security that comes with having patients pay for everything up front. A complete unbundling model tends to work better with a pay-as-you-go model, whereas a partial unbundling model may work with either billing policy. There is also the issue of whether patients may forego important visits for follow-up, service, or adjustments because they want to save a few dollars. Experiences with this vary, but it is a legitimate concern and may be avoided by collecting up front. You can viably separate fees and present your patient with options for service packages while collecting for everything at the beginning of the process. There is precedence for this in healthcare and it is not at all unusual.

7. So let me ask the obvious question—Will unbundling cost me money or will it increase revenues? Please say the latter...

Ultimately, it doesn't need to do either. If your fee schedule currently is based on a sound method for analyzing clinic operations (sorry, I'm just not a fan of arbitrary methods to set fees!), the final amount will probably be the same whether you account for all your costs in a single unchanging number or provide the patient with options - which will ultimately result in a single number anyway. If you decide to use partial bundling, for example, you would simply need to add up the fees for the services you expect to provide as part of that package. You realize that it may vary from one patient to the next -someone may need additional office visits and someone else may hardly need to see you at all. However, most providers know about how many visits an average patient needs to get started, how many repairs are needed, how many adjustments are necessary per year, etc. Theoretically, this is the method that you should be using to derive a bundled fee, although I know that isn't that case for many audiologists. As most audiologists use arbitrary pricing methods (i.e. - not based on anything related to clinic operations), the fee schedule that you derive from a systematic analysis of your business may differ from your current one. That is not a bad thing!

This issue also directs you back to the reason why you might consider unbundling in the first place. As discussed a moment ago, can you justify the amount you are charging, compared to the amount of services you provide to different patients? This is particularly true if you charge the same amount to patients with vastly different needs. Many audiologists will net $2000 - $4000 from sale of a pair of hearing aids. Can you look a colleague in the face and say that you are providing $4000 worth of services? $3000 worth of services? Even $2000 worth of services? Perhaps you are, but I know of very few colleagues who can honestly answer that question - because they don't know. The process of unbundling provides you with a basis for your charges and gives you the confidence of knowing that you are charging a fair and reasonable fee for your service. This comes through to your patients as well. I have never had a patient question the cost of what they are purchasing once they know from where it is derived.

Ultimately, you may be worth all that money. Many packages used in a partially unbundled model include long-term services. The important thing is to know what the cost of those services is and to use that information to construct your fee schedule.

8. Do patients really care how I bill?

I certainly can't speak for all patients, but I have not seen a strong trend in any direction. I have heard reports that some patients felt they were "nickel-and-dimed" when all services and products were charged separately and as they were incurred. I also know that many patients do not like the high sticker price when paying for everything up front. I personally believe that the way everything is presented and discussed with the patient is the most important aspect. You have the ability to present your method in a way that is positive and beneficial for the patient. Part of choosing and implementing a service model is developing your answers about these kinds of questions. If you are switching to unbundling, for instance, you should anticipate the questions that patients will ask and make sure you have answers ready for them. An apparent lack of knowledge and confidence will undermine anything you do with a patient.

9. For that matter, do patients really care whether I bundle services at all?

Recent statements by consumer groups such as the Hearing Loss Association of America would indicate that they do care. Patients want greater transparency in the products and services that they receive. That means they want to see what they are purchasing and the value of each component. Furthermore, patients - as with all consumers, including yourself, I'm sure - want choices when making a decision. This is especially true when the decision involves thousands of dollars. As we discussed earlier, one size does not fit all when talking about hearing instrument fitting. Patients have different needs and different motivators. By offering options, you can better serve your patients' needs and you might even retain a few more patients. I would say that you should never assume patients don't care about what goes on in your clinic. They are placing a great deal of trust in your ability to improve their lives. Believe me, they care!

10. With an unbundled approach, I can't help thinking that many patients may not return for follow-up services, just to save some money. Is this a real concern?

This is a real concern. The reason you have this concern is because you want to be sure that patients receive the services that are necessary to be a successful hearing instrument wearer. There will always be patients who look for every opportunity to cut costs and there will always be patients who "get it" and place a much higher value on the service they receive, as opposed to the money they must spend to get it. In between are most people, who are simply looking for value. It is partially our job to ensure that we present the follow-up services as valuable enough that a patient would never think of skipping them. However, most clinics are still placing ALL the value on the product, through their ads and their approach to fitting and counseling. This creates a very real possibility that patients will miss services they really need because they don't yet realize the value (in my experience, they do ultimately see the value once their lives improve because of our work - and for most this happens quite quickly). This is a reason why most, if not all audiologists, who move to an unbundled model ultimately select a partially unbundled option. Most of us who use unbundling began by gradually exploring options for grouping services while still keeping products and some of the services separated and offering our patients options. While I don't have exact data to support this, I'm quite certain that the partially unbundled model now appears the most prevalent model in use.

11. I also have a fear that patients will not even come to see me in the first place when they learn that my office does things differently.

No denying it - there is a certain comfort in sameness. If one place does things differently than everyone else, it is an understandable reaction to wonder why. You need to decide whether this will be a drawback or an opportunity. Marketing to an unbundled model can be full of advantages over the other clinics in your area. What consumer doesn't like words like "choice," "value," "service,' and "fair?" All these apply to clinics using unbundled models. Just as with any marketing approach, you will need to make a list of the things you do that are attractive to patients and then include those concepts in your marketing. You might even want to ask a few of your patients to come to your clinic (or stay in your clinic) so that you can describe this model to them, show them the benefits, and then ask what they like about it. Chances are, other people who are not yet your patients will like the same things.

12. Not to be too selfish, but what's in it for me?

You certainly should think of yourself also. You have a business to run and you won't do your patients any good if you can't continue to operate. I believe that there are a number of benefits that I and others have received from adopting an unbundling paradigm. Performing a cost analysis of your business is an incredible process for a business owner (or non-owner). It can provide you with a completely different perspective on how your business operates, and with a lot more confidence in your fees when you eventually use this information to set them.

 

 

 

 

  • You can ensure that you are paid for the services that you provide. An unbundled model focuses on fees that are appropriate for the time and resources that you dedicate to caring for your patients. You can therefore be assured that you are being fairly reimbursed for them, rather than using an arbitrary method that may or may not relate to real costs of running your clinic.






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  • You have something to promote. There is a good possibility that you will be the first in your area to adopt this fee structure. Although even if it is not, this can be a good opportunity to promote something unique and positive about yourself that benefits potential patients.






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  • Many audiologists enjoy the intangible benefits of unbundling more than the business ones. When was the last time you felt like a hearing aid sales person (and when was the last time your patients treated you like one)? When you are selling a product, that is what you are and that is how people perceive you. Most audiologists enjoy providing the devices at or near cost and deriving their income from the services that the patient expressly (rather than inherently) decided to obtain. This is actually one of the most frequent comments that people make to me.






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  • There is an additional increase in patient confidence when they know that the recommendations you are making are not tied to how much you will make from the sale. Whether or not they verbalize this idea, your patients are intelligent and they know how this works. Unbundling removes the burden of tying the income you receive to the product you recommend. Although I'm not an ethics guru, this may very well make the difference between an ethical and unethical model. I will leave that up to the experts, however.

  • I believe that unbundling makes it much easier to practice in the modern world. Take these examples:

    • Insurance companies are increasingly paying for part of hearing aids, for the devices themselves (only), or for the devices and services. However, they will not typically expect providers of healthcare to wrap all their services around a product. Insurance companies are used to a medical model. Unbundling allows you to fit into that model very easily - and probably bill out more of what you are doing in the process.






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    • If you currently bundle and then bill insurance when you can, there is a very good chance that you are in violation of your contract and possibly federal law (if you accept federal insurance). Medicare in particular does not allow you to bill anyone else less than you bill them. If you include evaluations in the price of a hearing aid, as many people do, you cannot then charge Medicare for the same service. That is fraud.






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    • Last, as much as we would like to rid the world of direct hearing aid sales, they are not going away. I have seen and heard discussions from people who choose to turn away patients that do this, but what a missed opportunity! Those patients have the opportunity to see what an audiologist can do for them - and become life-long patients of yours in the process! Have them sign a waiver if you believe that is the best course of action. Wherever they purchase the device, unbundling makes it easy for you to provide the services that are so essential for successful hearing aid use. Not only that, those hearing aids are marked up! The patient can quickly be made to see that it is NOT a bargain to shop online. The bargain is YOU!

 

 

13. Okay. You have presented a bunch of good points, but what about the negatives? You aren't going to tell me there is no down side to unbundling, are you?

No, absolutely not. I do believe the negatives to unbundling are minor compared to the positives, but there are always drawbacks - particularly when change is involved. You will definitely need to spend more time analyzing your business. Not just once, but annually if you do this well. Personally, I believe this is a positive. Even though it takes a bit of time and dedication, I have never regretted the result of doing an annual review of my business. It does take more time than a bundled model using arbitrary markups, though. Also, as you brought up earlier, patients may have some resistance to a model that is different than what they have seen elsewhere. Some may even put their guard up and assume that you are trying to pull something. However, I have never had an experience where a carefully thought out explanation did not result in a permanent and satisfied patient. Patients do understand this. It makes a lot of sense because we are used to this model in other healthcare clinics. Last, change is difficult. There is no way around it. Those of you who had the same psychology classes I did in college may remember that people tend to change when the status quo becomes a bigger negative than taking a new path. If you are not ready for unbundling, then no one will make you do it. However, if you can look at the traditional way of doing things and realize, like I did many years ago, that this is not how you want to care for your patients and not the way you want to run your clinic, then changing to an unbundled model will not be that difficult. It will simply make sense and you may not even remember why you used any other model.

14. I have to admit that last statement got me. I really don't know why I do things the way I do. Where do I start?

The first step when moving to an unbundled model is to do a thorough analysis of your business operations. This isn't as difficult as it may sound and it is essential to creating a fee schedule that is based on the cost of providing clinical services. You also may be able to hire an accountant to help you do it. Chances are you already have most of the information in your accounting system. You will need to run reports that provide you with all the expenses and revenues that you incur. I recommend doing this for at least the past year. Looking at two or three years allows you to see trends (also a very handy tool to running your business and a big reason why this analysis is so great to do every year). If you are not comfortable with running reports or unsure how to read them, this is where your accountant can help you. What you want to have is all the purchases and expenses you incur throughout the year (if using an annual basis, which is recommended). This should be pretty easy to get out of any accounting system and will allow you see how much you spend on everything, from employees to equipment purchases, to keeping the lights on, to marketing, to equipment maintenance and calibration. Doing this will allow you to create a list of the costs of doing business. This is the first step in using a cost-based method to establish a fee structure (coincidentally the same phrase as the title of a presentation I gave on this subject a few years ago).

15. Done! I texted my accountant while you were talking and he promised to have that information to me tomorrow. Except, I don't know what to do with this information.

That's okay. I can help. The next step is to put the information into a format where you can use it to determine your cost of providing various services. There are probably as many ways to do that as there are people making recommendations to do it. However, I will outline a few basic steps and you can decide how far to take it. Remember that the more detail you have, the more accurate your projections will be and the more likely you will be to meet your goals (such as the one to be profitable).

Personally, I like to separate expenses into salaries & benefits, overhead (traditionally all the "fixed" costs of doing business - ones that don't change depending on how much business you do, except I like to include office supplies, professional fees, professional development, and such), equipment costs, and clinical supply costs. One reason I like this breakdown is that I can put each of these on a separate page or section of a spreadsheet and manipulate them independently. This can be a powerful management tool.

How to account for each item in these categories would take more time than we have, but this is another area where an accountant can assist you. An accountant can help you determine how much to assign to benefits (e.g., it is often estimated at 50% of salary) and ensure that you account for everything (such as the life cycle of equipment, calibration costs, and an allotment or repairs). Once you have listed out all that information, you would use it to calculate the hourly cost of providing each of the services you offer, and then adjust according to time for each service.

16. I have to admit, I have absolutely no idea how to calculate the cost of services. Would that just be the daily salary of the clinician divided by 8 hours?

Nice try, but no. This is the step where many people get confused. As a result, I have seen some very simple ways to calculate costs - probably intended to not scare people off. However, if you really want accurate information, there is more to it than that. Let's start by making some assumptions. Tell me if you think these are fair, although you can always adjust them later to fit your clinic's operations.

 

 

  1. For the available hours, let's assume your office is open from 9:00am to 5:00pm. You probably try (unsuccessfully, if your days go anything like mine) to schedule an hour for lunch. That leaves 7 hours of patient contact and report-writing (which we should get paid to do!) per day.






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  6. You have your clinical equipment calibrated every year, once per year, and you occasionally have breakdowns or need to replace parts that are wearing out. Let's say we allocate 20% per year for maintenance.






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  11. You and your employees are gone (vacation, holidays, sick, whatever) around 4 weeks total each year. You aren't providing patient services those times, so you will need to adjust your payroll and your potential revenues accordingly. For instance, when determining your hourly cost for clinical staff, divide annual costs by 48 weeks, then by 5 days, and last by 7 hours. You can do the same with non-clinical staff. When you get to the step of forecasting revenue-generating activities, don't assume people are working every hour of every day during the year. Provide for this time off.






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  16. You accept insurance. Because of this, you don't always have control over revenues. It will be important to compare your final "calculated" fee schedule with insurance reimbursement. You want to make sure that you don't under-charge for services that insurance is happy to pay you more to provide. You also want to adjust what you charge so that non-insurance payments help you to meet goals for revenues from each service.

 

 

Does that make sense or have I completely lost you?

17. I had to re-read that last one a couple of times, but all those things at least sound reasonable. What's next?

The next step is to apply all those concepts and numbers to the actual cost of providing services. For instance, each clinician makes X dollars, which would be divided by the 48 working weeks, then by 5 days per week, then by 7 clinical hours per day. In our example, that is the cost of each clinician's time. The important part is to also account for non-clinical staff time. The salaries and benefits of all those individuals should be grouped together, the hourly cost determined - same as for clinical staff - and then divided by the number of clinical staff you have. This takes the cost of all the support personnel and divides it amongst all the clinicians, who are the ones earning billable revenues.

Similarly, the overhead costs should be determined. As I mentioned earlier, I include in this category things such as professional development, legal and accounting fees, office supplies, etc. - pretty much everything except staff and equipment-related costs. You might want to break things out differently, but this is just what works for me. Ultimately, you want all these costs to be divided over the same hours as above - the hours during which clinicians are performing billable activities. Remember, we are not trying to look at the overall costs of running the business - that is for another day and another purpose. We are only trying to determine how much it costs us to provide each service to our patients.

An important thing to include early in these calculations is profit. Many people treat profit as if it is something that happens when the year goes well, but I encourage people to build profit into their calculations. Set a reasonable expectation and include that somewhere (overhead, salaries, wherever). Profit is essential to a business and should not be a happenstance. It should be forecasted and treated as a necessary item. Why I believe that is probably outside the scope of our discussion, but suffice it to say that a business in the real world could not operate indefinitely without it.

18. Alright. I think I have the general idea. I noticed that you didn't factor in any of the equipment or consumables. Why is that?

You are very astute! That is a very different step, at least the way that I do it. Others may prefer a simpler calculation, but I will describe what I do and you can decide for yourself. Clinical equipment is a very different category because some equipment is used for some activities and other equipment for other activities. I like to go through and calculate costs for each CPT code that I bill in my clinic. When doing this, it doesn't make much sense to include the cost of a real-ear measurement system in my analysis of the costs for performing hearing evaluations!

Instead, I determine how many times in an average month (or week or year) I use each piece of equipment, then calculate how much it costs to use that equipment over its lifetime. For instance, if I do 6 diagnostic hearing evaluations, 8 hearing aid evaluations, and 2 tinnitus evaluations on average each week, I am using my audiometer 16 times each week. That is 768 times each year and I plan to replace it every five years. Let's say I paid $6000 for it (I honestly have no idea what they are these days), $200 to calibrate it each year, and allocate $2400 in maintenance/repair each year - that's $8200 over the five-year life of the device. Therefore, my cost per use is $8200 / 3840 uses over five years = $2.14 per use. I use disposable eartips, so we might need to add $1 for consumable costs. It now costs us $3.14 in equipment and consumable costs each time we use the audiometer. That sound pretty neglible each time, but if we don't account for this and include it in our costs, we will not have recovered the costs necessary to buy new equipment five years from now. At that time, it will seem like a lot!

19. Wow! My head is starting to spin a little bit. Is it okay if the main thing I get from this is that it is important to include equipment costs in the analysis?

Yes, that probably is enough for now. I know this can get a bit involved. Believe it or not, we are just skimming through this topic. This is why hiring someone who really knows this area can be a real help. To illustrate how that all comes together, let's skip to the final step - creating actual fees for your new fee schedule. This may be easiest to demonstrate by working backward. Let's take a couple of examples and show how all this preparation can result in a fee schedule:

A) Let's say the time for a comprehensive hearing evaluation (CPT codes are whatever you happen to do for your evaluations) may be one hour for assessment, explanation and counseling, and writing of the report. The following would be added to account for that hour:
 

a. One hour of staff time (clinician + appropriate portion of support staff time)

b. One hour of overhead costs (non-staff / non-equipment), however you break those out

c. The cost of the audiometer and consumables for that single use. If we want to be REALLY thorough, we could include the cost of sound field, VRA, otoscope and specula, and anything else that we would use. We could even determine costs of adult vs. pediatric sessions individually, although I we don't often get paid differently for them.

B) Another service may be the fitting of a hearing instrument. Let's give ourselves 90 minutes for the appointment. That is what I schedule, even though I know some people don't spend that much time. In a completely unbundled model, we would probably separate out things such as fitting and real-ear measurement, if not counseling. In a partially unbundled model, these might be grouped into a dispensing fee and all included in a care package. Let's group them for simplicity. What kind of a fee package the group goes into is up to you.
 

a. We need to calculate 1.5 hours of total staff time.

b. We will need 1.5 hours of overhead and related costs.

c. We will need use of the computer, the programming device, and the real-ear measurement equipment (including the mic tube!).

d. We can include other costs as we deem appropriate or include them elsewhere. For instance, accessories such as battery testers, starter packs of batteries, and dry aid kits may be wrapped into the cost of the hearing instruments, included in the care package, or included in the dispensing package. Whatever makes sense to you and how you present it to your patients is fine, as long as you account for it.

So, you can see that the real work is in getting all your costs down to an hourly or per-use expense. Once that is done, it is simply a matter of identifying what all does into a service and including those costs. This is also a good exercise because it forces you to think through your clinical services in very minute detail. That level of critical thinking about your work is never a bad thing. If you bill insurance, don't forget to go back and compare your fee schedule with what you actually receive for some services. I can almost guarantee that it will be an eye-opener! You may need to change some of your fees so that the average of private-pay and billed revenues covers the costs of providing that service. Otherwise, insurance may force you to lose money on that service. On the other hand, you may find a service or two for which insurance pays more than you would bill out using this method!

20. Even though I don't completely understand everything we just discussed, I really like what I am hearing from you. Where else can I find information and resources about unbundling?

That is an excellent question to end this discussion. The American Academy of Audiology just completed a paper on unbundling and within it discuss many of these points, as well as some other issues. There are fairly regular presentations each year at the annual meeting of the American Academy of Audiology, the conference of the Academy of Doctors of Audiology, and even some state conferences. Also, trade publications, such as this one, are increasingly publishing information on this topic. There are currently no books (at least not that I am aware!) which address this topic specifically and in the necessary detail. However, there are people consulting in this area, including audiologists. Last, you can consult with your accountant, which is recommended. Even though he or she does not know much about what you do, the principles described above should be easy for him/her to understand. With a little help, a little time, and a little fortitude, you too can make the successful transition to unbundling!

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john a coverstone

John A. Coverstone, AuD

President and CEO of Sentient Healthcare

John A. Coverstone, AuD, received B.S. degrees in Speech Communication and in Speech & Hearing Science from Portland State University, an M.S. degree from Portland State University, and an AuD degree from PCO School of Audiology. Dr. Coverstone has previously worked in hearing instrument and medical equipment manufacturing and is currently the President and CEO of Sentient Healthcare, an audiology consulting company. He is the clinical audiologist at Innsbruck Hearing & Balance Center in New Brighton, MN (a Sentient Healthcare clinic), where he developed a unique fee-for-service model that has served as the basis for many of his lectures on the subject. Dr. Coverstone is the co-host of AudiologyTalk, a monthly podcast for audiologists available at www.audiologytalk.com. Dr. Coverstone is a former columnist and occasional contributor to various industry and professional publications. He has lectured at numerous conferences, private meetings, and universities including numerous lectures on the topic of unbundling and developing fee schedules.  Dr. Coverstone is currently serving on the Board of Governors for the American Board of Audiology and on the Board of Directors of the Minnesota Academy of Audiology, for which he is currently President. He has previously served on the Board of Directors for the Sight & Hearing Association, St. Paul, MN and has chaired or served on a number of committees for AAA, ABA, MAA, and S&H. The presenter is President and CEO of Sentient Healthcare, an audiology consulting company



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